MARKET REPORT: Predator eyes up limp software group Kewill

Kewill's long-suffering shareholders – led
by Schroders – should have accepted a bid
approach in 2010, believed to have been
around 120p a share.

The bidder then walked away and the stock
has been de-rated ever since as the group’s
trading performance deteriorated. Earnings
per share are now almost 20 per cent lower than
five years ago.

A profits warning last month, with the
board blaming missed major contract wins,
left it vulnerable and open to a much lower
offer, and yesterday a predator pounced.

Shares of the Surrey-based software group
jumped 19.75p, or 26 per cent, to 95.75p after the
board accepted an £89.5million or 96p-a-share
cash offer, under a scheme of arrangement,
from Francisco Partners, a technology specialist
private equity firm.

Broker Peel Hunt said the core business
appears to have weakened significantly and
Kewill has failed to deliver much in the way of
organic growth over the last five years, and
advised shareholders to accept the offer.

More...

Online gaming software group Playtech
advanced 16.75p to 387.75p following strong
first-quarter results. Total revenues soared
104 per cent to €75.1million and gross income was up
90 per cent to €88.4million.

Shareholders were also a lot happier to hear
that the board had decided against acquiring
for £78million certain social business-to-business,
real money gaming and business-to-business
media assets from a company linked to the
group’s Israeli multi-millionaire founder
Teddy Sagi. Instead, the board has decided
to enter into a software licence agreement for
those assets in the ordinary course of business.
Too right!

Boosted at the outset by favourable trading
news from satellite TV group BSkyB, 10.5p
up at 701.5p, and fashion retailer Next, 77.5p
higher at 2973.5p, the Footsie pulled up lame.
It followed disappointing US employment
data and the close was 54.12 points off at
5,758.11, while the FTSE 250 dipped 27.97
points to 11,475.89. Wall Street closed 10.75
points down at 13,268.57.

An Oriel Securities recommendation to buy
in anticipation of today’s first quarter trading
statement helped Legal & General rise 2.7p to
121.8p. The broker has a target price of 162p.

Drugs group Shire advanced 11p to 2027p,
but Panmure Gordon advised clients to sell.
It followed news of a new entrant into the
Gaucher’s disease market. Overnight, the
US Food & Drug Administration approved a
new Gaucher’s disease product Elelyso,
manufactured by Pfizer.

Gaming and betting business Rank, which
in March ended talks to buy the casino business
of private equity owned Gala Coral, rose
7.5p to 121p despite Credit Suisse slashing
its price target to 137p from 165.75p and its
rating to neutral.

Possibly boosted by news that UK mortgage
approvals rose last month, despite the
expiry of the stamp duty exception for first
time buyers, housebuilder Bovis Homes
erected a gain of 24p at 487.9p. Barratt Developments
added 3.2p at 135.2p.

Shares of the UK’s largest power station
Drax continued to motor on hopes of a bid.
They soared to 584p before closing a further
22.5p better at 574p.

Surveillance technology company Quadnetics
jumped 19p to 301.5p after reporting a
dramatic leap in like-for-like sales in the first
quarter 2012, as it cashed in on demand from
the gaming and oil and gas sectors.

The company expects to deliver full-year
results ‘in line with market expectations’.

Don’t be short of ViaLogy, 0.25p dearer at
4.13p. That was the shout in dealing rooms
as the service provider to global oil and gas
production companies announced an
unnamed major oil and gas company –
believed to be BP – had deployed the AIM-listed
company’s patented QuantumRD
processing technology.

Demand in a thin market lifted Coastal
Energy 55p to 1065p. The Thai-focused
exploration and production company
announced successful results at the Bua Ban
South A-O3ST and A-05 wells.

Stamp dealers Stanley Gibbons eased 1.5p
to 227.5p after reporting in-line trading for
the first four months of the year. It has seen
strong growth in online sales following the
relaunch of its key websites last year. Online
sales were double those of last year. The
company launched its first Gibbons Stamp
Monthly magazine in April.

Vernalis improved 0.63p to 25.63p on hearing
that V81444, its treatment for Parkinson’s
disease, has successfully completed its Phase-
1 clinical trial in healthy male volunteers,
demonstrating that the candidate is well tolerated
with no unexpected side effects.

- Wickes building materials group Travis
Perkins continues to make progress, despite a
tough economic backdrop, says broker Shore
Capital. The integration of BSS, bought for £553million
in May 2010, has exceeded all expectations.
Strong cash flows are lowering debt giving
scope for further bolt-on acquisitions. Market
conditions remain challenging but the shares at
1041p, down 14p, look cheap for a company
which continues to have high exposure (30 per cent)
to the resilient South East economy.